China to extend NEV purchase tax exemption till end-2023 to boost consumption
China to extend NEV purchase tax exemption till end-2023 to boost consumption

China to extend NEV purchase tax exemption till end-2023 to boost consumption

 

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China will extend the exemption of purchase taxes on new energy vehicles (NEVs) for another year until the end of 2023 to support the development of the sector and boost consumption, the Ministry of Finance said on Monday.

It’s the third extension since China introduced the policy in 2014. The latest exemption had been set to expire at the end of this year. The renewed exemption applies to NEVs purchased from January 1, 2023 to December 31, 2023, and it covers pure electric vehicles, plug-in hybrid electric vehicles and fuel cell electric vehicles that meet certain requirements.

The move could greatly promote the development of China’s NEV industry and could stabilize market expectations and further boost NEV sales, said Cui Dongshu, secretary general of the China Passenger Car Association (CPCA), on Monday.

China imposes a 10% vehicle purchase tax and with the exemption, those who buy a new energy vehicle with after-tax price of 200,000 yuan will enjoy an exemption of 20,000 yuan. China’s State Taxation Administration said last month that, in the first seven months of the year, purchase tax exemption on new energy vehicles reached 40.68 billion yuan, surging 108.5% from a year earlier.

Previous policy incentives have led to a boom in China’s NEV market, which has become an important driver of domestic consumption.

The NEV market posted a strong growth in August with both production and sales hitting record highs. Production reached 691,000 vehicles, surging 120% from a year earlier, while sales reached 666,000 units, jumping 100% year over year, the China Association of Automobile Manufacturers (CAAM) said.  

In the first eight months of the year, China produced 3.97 million units of NEVs and sold 3.86 million units, surging 120% and 110%, respectively, from the same period last year, according to the association.

China’s NEV sales so far in 2022 have surpassed the 5.5 million units forecast by the association at the end of last year, and the full-year figure is expected to reach 6.5 million.

In August, several local governments also announced new incentives to boost NEV sales. In South China’s Hainan province, the local government will provide qualified individuals 8,000 yuan ($1,117) as a bonus for switching to NEVs. In Changsha city, capital of Central China’s Hunan province, will offer discounted parking charges for NEV buyers